Tennessee § 67-5-1008 - Present use valuation — Capitalization of income method — Rollback taxes — Involuntary conversion of use.

§ 67-5-1008. Present use valuation — Capitalization of income method — Rollback taxes — Involuntary conversion of use.

When a parcel of land has been classified by the assessor of property as agricultural, forest, or open space land under this part, it shall be subsequently considered that its current use for agricultural or timber purposes or as open space used for neither of these purposes is its immediate most suitable economic use, and assessment shall be based upon its value in that current use, rather than on value for some other use as may be determined in accordance with part 6 of this chapter. It is the responsibility of the applicant to promptly notify the assessor of any change in the use or ownership of the property that might affect its eligibility under this part. After a parcel of land has been classified by the assessor of property as agricultural, forest, or open space land under this part, the assessor of property shall record it on a separate list for the classified property. The assessor may record with the register of deeds the application for the classification of the property. However, if the assessor does not record the application, then the property owner shall record with the register of deeds the application for the classification of the property. Any fees that may be required shall be paid by the property owner. Henceforth, the assessor shall appraise the land and compute the taxes each year based upon both: The twenty-five percent (25%) of appraised value applicable to property in the farm classification and present use value; and Farm classification and value as determined under part 6 of this chapter, but taxes shall be assessed and paid only on the basis of farm classification and present use value under this part. The taxes computed under part 6 of this chapter shall be used to compute the rollback taxes, as defined in § 67-5-1004 and as provided for in subsection (d). The general assembly finds that value as determined under subdivision (b)(2)(B) should not be deemed the value of property for any purpose other than a future assessment of rollback taxes, because it does not determine the actual tax liability of a qualifying owner at the time of valuation. Accordingly, value as determined under subdivision (b)(2)(B) shall not be deemed determinative of fair market value for any purpose other than the administration of property taxes under this title. A parcel of land classified by the assessor as agricultural, forest or open space land under this part shall be valued by dividing three (3) into the sum of two (2) times the use value as defined in this subsection (c), plus the farm land value as defined in this subsection (c). The rate of increase in per acre present use values as determined under this subsection (c) shall not exceed a factor measured by the number of years since the last general reappraisal or updating of values in the county, times six percent (6%). Use value shall be determined by dividing: The annual agricultural income estimate for such parcel as determined by the division of property tax assessment by; The capitalization rate as determined in subdivision (c)(2)(C). For purposes of this part, “agricultural income estimate” means anticipated net return to land utilizing sound farming or forestry practices. In determining anticipated net return to land that is used for agricultural and forestry purposes, the division of property tax assessments shall consider farm income, or forestry income, soil productivity, topography, susceptibility to flooding, rental value and other factors that may serve to determine anticipated agricultural or forestry income. The annual agricultural income estimate for a parcel of open space land shall be the same as that for the least productive type of agricultural land. The capitalization rate shall be the maximum allowable rate on loans for terms in excess of five (5) years guaranteed by the federal Farm Service Agency or its successor, as of the assessment date for the year in which the use value schedule is being developed. The rate may be adjusted by no more than one hundred (100) basis points to reflect differences in land classes within a jurisdiction. Farm land value shall be determined by the division of property assessments based solely on farm-to-farm sales least influenced by commercial, industrial, residential, recreational or urban development, the potential for such development, or any other speculative factors. The state board of equalization, upon petition by at least ten (10) owners of agricultural, forest or open space land, or upon petition of any organization representing ten (10) or more owners of agricultural, forest or open space land, shall convene a hearing to determine whether the capitalization rate has been properly determined by the division of property tax assessments, whether the agricultural income estimates determined by the division of property tax assessments are fair and reasonable, or if the farm land values have been determined in accordance with this section. Such hearing shall be held in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, part 3. The petition shall be filed at the office of the state board of equalization on or before twenty (20) days after the date the division of property assessments publishes notice of the availability of the proposed use value schedule in a newspaper of general circulation within the county. The appropriate assessor shall compute the amount of taxes saved by the difference in present use value assessment and value assessment under part 6 of this chapter, for each of the preceding three (3) years for agricultural and forest land, and for the preceding five (5) years for open space land, and the assessor shall notify the trustee that such amount is payable, if: Such land ceases to qualify as agricultural land, forest land, or open space land as defined in § 67-5-1004; The owner of such land requests in writing that the classification as agricultural land, forest land, or open space land be withdrawn; The land is covered by a duly recorded subdivision plat or an unrecorded plan of development and any portion is being developed; except that, where a recorded plat or an unrecorded plan of development contains phases or sections, only the phases or sections being developed are disqualified; An owner fails to file an application as required by this part; The land exceeds the acreage limitations of § 67-5-1003(3); or The land is conveyed or transferred and the conveyance or transfer would render the status of the land exempt. When the tax rate for the most recent year of rollback taxes is not yet available, the assessor shall calculate the amount of taxes saved for the most recent year by using the last made assessment and rate fixed according to law, and the trustee shall accept tender of the amount determined to be owing. The amount of tax savings calculated under this subsection (d) shall be the rollback taxes due as the result of disqualification or withdrawal of the land from classification under this part. Rollback taxes shall be payable from the date written notice is provided by the assessor, but shall not be delinquent until March 1 of the following year. When the assessor determines there is liability for rollback taxes, the assessor shall give written notice to the tax collecting official identifying the basis of the rollback taxes and the person the assessor finds to be responsible for payment, and the assessor shall provide a copy of the notice to the responsible person. Rollback taxes shall be a first lien on the disqualified property in the same manner as other property taxes, and shall also be a personal responsibility of the current owner or seller of the land as provided in this part. The assessor may void the rollback assessment, if it is determined that the assessment was imposed in error, except there shall be no refund of rollback taxes that have been collected at the request of a buyer or seller at the time of sale. Liability for rollback taxes, but not property values, may be appealed to the state board of equalization by March 1 of the year following the notice by the assessor. However, property values fixing the amount of rollback taxes may only be appealed as otherwise provided by law. If, under subdivision (d)(1), only a portion of a parcel is subject to rollback taxes, the assessor of property shall apportion the assessment of such parcel on the first tax roll prepared after such taxes become payable, and enter the apportioned amount attributable to such portion as a separately assessed parcel on the tax roll. Such apportionment shall be made for each of the years to which the rollback taxes apply. In the event that any land classified under this part as agricultural, forest, or open space land or any portion thereof is converted to a use other than those stipulated herein by virtue of a taking by eminent domain or other involuntary proceeding, except a tax sale, such land or any portion thereof involuntarily converted to such other use shall not be subject to rollback taxes by the landowner, and the agency or body doing the taking shall be liable for the rollback taxes. Property transferred and converted to an exempt or nonqualifying use shall be considered to have been converted involuntarily if the transferee or an agent for the transferee sought the transfer and had power of eminent domain. In the event the land involuntarily converted to such other use constitutes only a portion of a parcel so classified on the assessment rolls, the assessor shall apportion the assessment and enter the portion involuntarily converted as a separately assessed parcel on the appropriate portion of the assessment roll. For as long as the landowner continues to own the remaining portion of such parcel and for as long as the landowner's lineal descendants collectively own at least fifty percent (50%) of the remaining portion of such parcel, the remaining portion so owned shall not be disqualified from use value classification under this part solely because it is made too small to qualify as the result of the involuntary proceeding. In the event that any land classified under this part as agricultural, forest, or open space land or any portion thereof is acquired by a bank, as defined in § 45-2-107(a)(1)(A), by a savings and loan association, as defined in § 45-3-104(a)(1), or by a holder of a deed of trust or mortgage in satisfaction or partial satisfaction of a debt previously contracted in good faith, such land or any portion thereof so acquired shall not be subject to rollback taxes assessed against or payable by the bank or savings and loan association, and shall be subject to rollback taxes, only if the land is used for a non-green belt purpose or after such land is sold by the bank, savings and loan association or a holder of a deed of trust or mortgage and then only as provided in subsection (d). This subdivision (e)(3) shall likewise apply to the temporary transfer of property classified under this part to a trustee in bankruptcy. If any property or any portion of the property classified under this part as agricultural, forest, or open space land is disqualified by a change in the law or as a result of an assessor's correction of a prior error of law or fact, then the property or any portion of the property that is disqualified shall not be assessable for rollback taxes. The property owner shall be liable for rollback taxes under these circumstances if the erroneous classification resulted from any fraud, deception, or intentional misrepresentation, misstatement, or omission of full statement by the property owner or the property owner's designee. Nothing in this subdivision (e)(4) shall relieve a property owner of liability for rollback taxes if other disqualifying circumstances occur before the property has been assessed at market value for three (3) years. If the sale of agricultural, forest or open space land will result in such property being disqualified as agricultural, forest or open space land due to conversion to an ineligible use or otherwise, the seller shall be liable for rollback taxes, unless otherwise provided by written contract. If the buyer declares in writing at the time of sale an intention to continue the greenbelt classification but fails to file any form necessary to continue the classification within ninety (90) days from the sale date, the rollback taxes shall become solely the responsibility of the buyer. For purposes of valuation pursuant to this section, the maximum acreage available for any one (1) owner classified as forest or open space land under this part shall be one thousand five hundred (1,500) acres. This subsection (g) shall operate to change the classification of any such land in excess of one thousand five hundred (1,500) acres that has been so classified under this part prior to July 1, 1984. Property passing to a lineal descendant of a deceased greenbelt owner, by reason of the death of the greenbelt owner, shall not be subject to rollback solely because the total greenbelt acreage of the new owner exceeds the maximum under § 67-5-1003, or will exceed the maximum following the transfer. Property exceeding the limit in these circumstances shall be disqualified from greenbelt classification, but shall not be assessable for rollback unless other disqualifying circumstances occur before the property has been assessed at market value three (3) years. Acts 1976, ch. 782, § 8; 1979, ch. 149, §§ 1, 2; 1982, ch. 818, § 1; 1983, ch. 267, § 1; T.C.A., § 67-657; Acts 1987, ch. 279, §§ 1, 2, 4; 1992, ch. 661, §§ 8-12; 1995, ch. 459, §§ 1, 2; 1997, ch. 160, § 1; 1998, ch. 683, § 1; 1999, ch. 141, § 6; 2001, ch. 152, §§ 4-7; 2002, ch. 632, §§ 2-5; 2006, ch. 861, § 2; 2008, ch. 971, § 1; 2008, ch. 1161, §§ 5, 6; 2010, ch. 928, § 1; 2014, ch. 589, § 1; 2016, ch. 685, § 1; 2019, ch. 322, § 1. Code Commission Notes. Former subdivisions (c)(1)(A) and (B) were deleted as obsolete by authority of the code commission in 2006. Compiler's Notes. Acts 1995, ch. 459, § 3 provided that the 1995 amendment changes in (c)(2)(C) shall apply beginning with the 1996 tax year; however, the 1995 amendment changes in (e)(2) also apply to the 1995 tax year. Acts 1999, ch. 141, § 7 provided that the 1999 amendment by that act, which added the last sentence in (a), shall be effective for tax year 1999. Acts 2001, ch. 152, § 8 provided that the amendments by that act shall be effective for tax year 2001. Acts 2002, ch. 632, § 6 provided that there shall be no rollback assessment when property is disqualified solely as a result of amendments by the act to §§ 67-5-1004(1)(B) and 67-5-1008(d)(2) -(4) and (e)(3), so long as the property continues to be used in a qualifying use and is not the subject of a sale or transfer which would cause the property to violate the minimum size or maximum acreage provisions of this part. Such disqualified property shall be at risk of a rollback assessment until it has been assessed at market value under part 6 of this chapter for three (3) years, and during such time a rollback assessment shall be made if the property ceases to be used in a qualifying use or is the subject of a sale or transfer which would cause the property to violate the minimum size or maximum acreage provisions of this part. Acts 2006, ch. 861, § 3 provided that the act, in addition to prospective applications, shall apply to applications pending before or under appeal to the state board of equalization, applications for which the executive secretary or state board designee has made a determination but the period in which to appeal under § 67-5-1501(c) has not run, or applications for which an appeal has been filed in court. Acts 2008, ch. 1161, § 7 provided that if property is disqualified for use value classification solely as the result of that act, any rollback assessment shall be limited to tax savings accruing after June 13, 2008. Amendments. The 2019 amendment, in (b)(1), deleted the former first sentence, which read: “After a parcel of land has been classified by the assessor of property as agricultural, forest, or open space land under this part, the assessor of property shall record it on a separate list for such classified property, and the assessor shall record with the register of deeds the application for such classification of the property”, and added the first three sentences. Effective Dates. Acts 2019, ch. 322, § 2. May 8, 2019. Law Reviews. Selected Tennessee Legislation of 1983 (N. L. Resener, J. A. Whitson, K. J. Miller), 50 Tenn. L. Rev. 785 (1983). Attorney General Opinions. Rollback taxes are not due when greenbelt property is conveyed to a government entity and that entity maintains the property's greenbelt use, OAG 05-046 (4/12/05). Greenbelt rollback tax liability on land converted to exempt status. OAG 10-71, 2010 Tenn. AG LEXIS 77 (5/21/10). Greenbelt rollback tax liability on land purchased through the wetlands acquisition fund. OAG 12-51, 2012 Tenn. AG LEXIS 50 (5/9/12).